Walter E. Hussman Jr., publisher of the Arkansas Democrat-Gazette, wrote a piece a while back about what idiots we all are for making our news available for free online. It’s been passing around the industry for several weeks. I’ve wanted to blog about it, but have been too darn busy.

The same column just appeared on the WSJ site. Ironically, you can’t read it unless you’re subscriber.

A few weeks ago, I wrote an e-mail for somebody responding to the column. Here’s a portion of that e-mail.

Newspapers have historically not been willing to invest in online strategies. It was cheaper to just repurpose content and when newspapers found that such a simple thing could create sufficient traffic to justify forced buys on classifieds, the revenue bump was intoxicating. Unfortunately, few news companies reinvested that new revenue. So today, many newspaper companies are hitting a plateau on revenue growth and have seen online audience growth go flat if not decline. I think that’s part of what is driving so many newspaper companies into the arms of Yahoo! They’ve run out of imagination and are unsure what to do next.

The newspaper industry did make a critical mistake when AP started selling content to Internet pure plays. It did devalue the content. But some slide toward content as a commodity was inevitable. You already had TV and radio getting the content, with a 1,000+ newspaper sites putting AP content online, the ease with which readers could get that news was going to drive the value down anyway. That cow has left the barn and it’s not coming back.

But AP is really beside the point. The real issue is and has been, is local news content a unique enough value that people will pay for it. So far, the evidence is no. No general-interest, local-content-for-paid strategy has worked yet.

I’ve argued this point many times. The pundits and publishers who say newspapers should stop giving away its content for free online miss a very fundamental and important point: Newspapers have always given their content away for free to readers. Readers don’t pay for content. They pay for delivery. They know it. We know it. Newsstand and subscription prices are set at a level to offset delivery expenses. With digital delivery, our delivery costs on a per-user basis are next to nothing. Whereas, the user is already paying for the device to read the news and the cost of the last-mile infrastructure to deliver it.

The “readers should pay” argument also ignores the fact that not only are we competing with an increasingly fragmented media world for people’s attention, we are competing for their money in a way that wasn’t an issue 50 years ago. Today, most of us have multiple phone bills, ISP bills, cable and satellite bills, other entertainment bills, more magazine subscription bills than before, and so on and on.

Now some people think we should tack on an online-subscription fee on top of that? It’s going to be a hard sell.

Mr. Hussman offers as an argument in favor of his strategy that his circulation declined only .4 percent. My question is, how would he explain the fact that the New York Post and New York Daily News, which both have sites with all free (not even registration) content both INCREASED circulation in the Sept. 06 Fas-Fax? The Post was up a whooping 5.1 percent.

The problem with looking just at his numbers, or just at the Post and Daily News, is that they are small sample sizes. They don’t tell the whole story. I suspect there are other market dynamics at work between Columbus and Little Rock besides just how content is handled.

Mr. Hussman notes that newspaper web sites generated 78 percent of its revenue from classifieds in 2006, saying this was “not from news.� But how much revenue does a newspaper generate from news to begin with? Most print revenue is classifieds, then from retail, then from circulation (which is not people paying for news, as we discussed). I don’t know any print general circulation newspaper that has ever generated (directly) revenue from news.

As for the Washington Post generating 8.4 percent of its revenue from online. Yes, and they’re one of the few papers in the nation that going back as far as 10 years ago didn’t just try to recreate the print paper online. The Post was one of the first to get into video, and to offer robust interactive features and to break news online without concern about “scooping� the print edition. The Post also did something few other newspapers have been willing to do: Invest real dollars in out-of-paper promotion and marketing. WashingtonPost.com has the largest local audience of any newspaper.com site in America. Of course it’s making more money.

Again, Mr. Hussman is very close to getting right the best online strategy. He’s still missing some pieces, but has the general outline of the right idea.

The main point is: Don’t see your web site as just another publishing channel. It’s a platform. It is the hub of your community. It is the place people are pulled to because it has the latest news, the most complete local data and the best place to meet and talk with other people in the community.

I’m a fan of John Hagel, a smart business consultant who has written some good books. The following quote comes from this post on this blog:

From my experience, if you want to transition from a content business to customer relationship business in the media industry, you need to start focusing on content platforms. In a traditional content business, you rely on professionals to deliver content that is meant to be experienced exactly as produced. Content platforms still rely on professionals, but the role of professionals in a platform business is to catalyze further contributions by a growing range of third parties, including audience members. A platform is meant to be built on and will rapidly evolve over time. A product, once produced, never changes.

As I have written before:

Products are designed to be used on a standalone basis – you buy it and you view it or listen to it in the specific way the content creator intended. Platforms are designed to be built upon – they create opportunities for the original creator, third parties or the customers themselves to extend, enhance and tailor the content in ways that the original creator never anticipated. Offered as a platform, content can create far more value than any equivalent standalone product.

What do content platforms include? They may start with content produced by the platform owner, but that is just the beginning. Content platforms point to other content and resources available anywhere on the net that are relevant to the focus of the platform – a key role of a content platform is to “curate” content, helping audience members to connect with high quality and relevant resources. Platforms also provide tools for participants to comment on and add to content that is already available – everything from tagging to discussion boards to content production tools. In the process, they provide environments for complex webs of relationships to be built among people who share an interest in the content, whether they are participating in its production or simply experiencing it.

If done well, content platforms provide a natural transition to audience platforms. It’s a subtle shift, but an important one. In content platforms, the primary focus is still on the content. In audience platforms, the primary focus is on understanding the needs and interests of a specific audience segment and using that understanding to help audience members increase their “return on attention.”